FCC’s “Gotcha” Game of ISP Regulation & Enforcement

The FCC’s just operative Open Internet Order, with its classification of broadband as Title II common carriage and vague Internet conduct standard, sets ISPs up for FCC “gotcha” or contrived regulation and enforcement.

FCC Commissioner O’Reilly exposed the FCC’s “gotcha!” game: “I will be vigilant in resisting any attempts by the agency to act as a referee enforcing rules known to none of the players and made up along the way.”

And the FCC’s Enforcement Chief, Travis LeBlanc, tacitly admitted to playing the contrived “gotcha!” game in an article with the National Journal entitled: “The FCC’s $365 Million Man.”

National Journal reported: “LeBlanc acknowledged that many of his cases fall into a legal gray area, where the companies might not have even realized they were doing anything wrong."Generally speaking, I've found that most companies want to do the right thing, and when it's clear that something is impermissible, they generally don't do it," he said. "So when you're in enforcement, you're almost always working in a gray area."”

The article went on to explain the perverse outcomes of this contrived “gotcha!” game of FCC enforcement: “…by not being lenient on companies that self-report violations, he is discouraging future companies from coming forward… The FCC's new approach will discourage cooperation and self-disclosure, and it's going to force regulatees to beef up on litigation instead of compliance with the rules…”

Consider the FCC’s new contrived Internet conduct standard in the Open Internet Order that is deliberately vague, fluid, and effectively limitless in order for the FCC to capture most any possible ISP behavior the FCC might want to regulate in the future.

This contrived Internet conduct standard enables “gotcha!” enforcement because if someone complains about something no one has thought of yet, the FCC has asserted open-ended roving authority to enforce and stop it after-the-fact. (Remember that the FCC was overturned inComcast v. FCC for contriving a “gotcha!” decision in 2010 that punished Comcast for something the FCC never indicated was illegal.)

Consider that no one knows when the FCC might radically “change its mind” again and arbitrarily whipsaw the Internet infrastructure industry with another reversal of Internet policy.

Remember, after a decade of classifying broadband as an un-regulated information service and several hundred billion dollars of infrastructure investment incented by that policy, the FCC completely reversed all that in its Open Internet Order with the capricious claim that it “changed its mind.”

The Wheeler-FCC contrived “gotcha!” here is that it did what four previous FCCs -- chaired by lawyers: Kennard, Powell, Martin, and Genachowski -- would not do because they appreciated that the statute clearly did not legally allow a service with a computer processing/internet access component to be classified as exclusively a pure Title II telecommunications service.

Yet another FCC contrived “gotcha!” risk for ISPs is that the FCC has effectively changed the definition of “reasonable” for Title II broadband regulation, from the long-settled legal definition of “reasonable” for Title II telephone regulation.

The FCC’s Open Internet Order concludes that any paid prioritization, i.e. anything but a zero price for downstream Internet traffic, is unreasonable, when common carriers have always been due reasonable compensation for supplying a compelled service. To compel someone to provide a service permanently for free is a takings under long-established common carrier precedent.

If the FCC imagines it unilaterally can redefine foundational terms like “reasonable” in ways that contravene established meaning in precedent, how can an ISP possibly have any sense of what will be legal or illegal under the FCC’s arbitrary and capricious Open Internet Order going forward?

In sum, the FCC has gone to extraordinary lengths to contrive a claim of effectively limitless authority to regulate most every aspect of the competitive broadband business, despite twice being overruled in court inComcast v. FCC and Verizon v. FCC.

Such a whatever-it-takes approach to asserting Internet regulatory authority is only needed if the FCC is intent on playing the “gotcha!” regulation and enforcement game with ISPs.

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.